Council decision on proposed Financial Strategy

Christchurch City Council is proposing to raise $550 million from Christchurch City Holdings Ltd (CCHL) and Council-owned trading organisations.

The Council today met to consider options to address its funding shortfall of approximately $1.2 billion, an increase on the $900 million estimated in the Cameron Partners report released in August 2014.

The increase is the result of the following factors:

· Insurers are unlikely to pay our claims in full

· The Council’s Three Year Plan assumed savings of $398 million could be made on the repair bill for horizontal infrastructure which is unrealistic

· Maintaining Council services at existing levels

· Additions to the Council’s capital works programme to cover earthquake repairs and rebuilding

· Allowing for extra borrowing as a contingency should the need arise.

Mayor Lianne Dalziel says the Council has had to make some tough decisions given the scale of the shortfall. She says it would be too big a burden on ratepayers in the current, difficult post-earthquake environment to expect our residents to shoulder this.

The Council is required to provide a proposed financial strategy for the Office of the Auditor General to demonstrate its ability to meet its financial commitments for the next 10 years (the period covered by the Council’s 2015-2025 Long Term Plan).

“I want to reassure our residents that no decisions will be made on the Long Term Plan without formal public consultation, including public hearings, which will begin in March next year. This consultation document will outline what the Council intends to do and how we propose to pay for it,” Lianne Dalziel says.

“Our bottom line position, shared by all Councillors, is we will not lose control of our core infrastructure assets, the two ports and Orion. But we will look for ways to maximise their strategic value and performance by offering shareholdings to appropriate partners. This may include selling assets which we do not regard to be strategic.

“The fact is that this city’s most valuable assets are actually our water supply, our rivers, our underground infrastructure and our roads. This is what we need to invest in for future generations.”

• Please note - The following is the decision made at today’s Council meeting regarding the proposed Financial Strategy:

1.1 That the Council approve for public consultation Stage 1 under option G comprising of the following core components:

The sale of up to 34% of LPC to a suitable strategic partner;

• The sale of 9% of CIAL to a suitable strategic partner

• The sale of 14.3 % of Orion on condition that the shares are only offered to another public entity, such as another TA, or an institutional investor such as NZ Super Fund, and that any agreement would be subject to the shares returning to the CCC should the investor wish to sell down its share at a future date.

• The $90 million capital repayment from Orion;

The facility to raise up to $150 million through preference shares when and if required over the term of the LTP either as a form of bridging finance or in the event other assumptions underpinning the strategy are not realised.

1.2 Investigate over the next three months the additional levers identified at para 5. (adjustments to size and timing of capital programme, and the establishment of a delivery vehicle which could see some projects shifted from the CCC’s capital programme and the potential to establish a fully integrated transport authority for Greater Christchurch) And resolve that in the event that these options are not found to be viable/desirable, then the Council will further divest from its asset base.

1.3 The specifics of any further divestment would be agreed to by Council prior to the finalisation of the proposed financial strategy and release of the Consultation Document on the LTP in March 2015.

1.4 Resolve to consult on the removal of specified assets from the Council’s current list of strategic assets. This consultation will take place as part of the LTP consultation and would be on the basis that those specified assets removed form the list of strategic assets can be sold without further public consultation, provided that all statutory requirements met.

1.5 Consult the public on reducing Christchurch City Holdings Limited’s interest in Christchurch International Airport Limited, Lyttelton Port Company and Orion as proposed in 1.1.

1.6 Note that the consultation referred to in 1.4 and 1.5 is necessary to meet the Council's obligations under section 97(1)(b) of the Local Government Act 2002.

1.7 Direct the Chief Financial Officer to continue engagement with the Crown to firm up on a Crown contribution towards the Council’s financial strategy, and the review of the timing, scale and final ownership of the Anchor projects, delay on the stadium until 2025 and report back by the end of January 2015.

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ENDS

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